Correlation Between Spirent Communications and MeVis Medical

Can any of the company-specific risk be diversified away by investing in both Spirent Communications and MeVis Medical at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Spirent Communications and MeVis Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Spirent Communications plc and MeVis Medical Solutions, you can compare the effects of market volatilities on Spirent Communications and MeVis Medical and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Spirent Communications with a short position of MeVis Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and MeVis Medical.

Diversification Opportunities for Spirent Communications and MeVis Medical

0.26

Correlation Coefficient

Spirent Communications  MeVis Medical

Modest diversification

The 3 months correlation between Spirent and MeVis is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and MeVis Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MeVis Medical Solutions and Spirent Communications is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Spirent Communications plc are associated (or correlated) with MeVis Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MeVis Medical Solutions has no effect on the direction of Spirent Communications i.e., Spirent Communications and MeVis Medical go up and down completely randomly.

Pair Corralation between Spirent Communications and MeVis Medical

Assuming the 90 days horizon Spirent Communications plc is expected to under-perform the MeVis Medical. But the stock apears to be less risky and, when comparing its historical volatility, Spirent Communications plc is 1.07 times less risky than MeVis Medical. The stock trades about -0.01 of its potential returns per unit of risk. The MeVis Medical Solutions is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,400  in MeVis Medical Solutions on September 2, 2024 and sell it today you would earn a total of  0.00  from holding MeVis Medical Solutions or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Spirent Communications plc  vs.  MeVis Medical Solutions

Spirent Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirent Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Spirent Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MeVis Medical Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MeVis Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MeVis Medical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Spirent Communications and MeVis Medical

The main advantage of trading using opposite Spirent Communications and MeVis Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, MeVis Medical can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MeVis Medical will offset losses from the drop in MeVis Medical's long position.

The idea behind Spirent Communications plc and MeVis Medical Solutions pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.